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29 January 2009

Vale Inco nickel processor a go

In December 2008, Vale Inco Newfoundland and Labrador submitted a draft Implementation Plan for the Long Harbour processing plant to the Provincial Government, and, in recent weeks, has been reviewing the details of the draft Plan with Provincial officials. The Long Harbour processing plant is a larger and more complex undertaking than envisioned when the Voisey’s Bay Development Agreement was signed in 2002. The overall construction complexity has grown significantly – requiring 43 months to complete construction rather than the 32 months originally thought possible. Initial work will begin in April 2009 with construction wrapping up in February 2013.

The government release took most of the afternoon to get ready, with the news conference being repeatedly postponed so the paperwork – i.e. the news release and backgrounder – could get finished.

Predictably, the government release makes it sound like the provincial government wrestled huge changes from the company. That would be like claiming credit for the Hebron gravity-based structure, something the proponents had said publicly from they outset they were committed to building.

In this case, there are a couple of funky claims that have the same GBS ring to them.

For example, there’s this statement from the provincial government release: “Discussions with the company continued after the extension expired under the understanding that no nickel concentrate would be shipped out of the province while negotiations were ongoing.” That understanding was explained last week by former Premier Roger Grimes. Vale Inco’s license to mine nickel at Voisey’s Bay included an exemption from a requirement to process the ore in the province. The exemption expired on 31 December 2008. Sure there was an “understanding” but that wasn’t linked to the extended timelines on the discussion.

Then there’s this chestnut:

To improve certainty around the schedule, Vale Inco has also agreed to change the original development agreement to remove a clause that would have allowed them to delay the project schedule for such reasons as a shortage of labour or supplier interruptions.

Improve certainty around the schedule? The company doesn’t really have to worry about labour shortages these days given the global economic downturn. The development agreement clause was originally developed in a time when the local workforce was in Alberta. Things have changed in the past six months, thanks to slowdowns in the tar sands.

The company has also agreed that it will pay the island industrial rate for its power supply, surrendering its option to have a better rate should other industrial customers obtain a better rate for whatever reason.

Now that the provincial energy corporation holds a virtual monopoly on hydro generation, that one was pretty much a no-brainer. Something says the Abitibi expropriation – introduced so hastily and rammed through the legislature in December - was about something other than rocks and trees and “repatriating” resources.